The Making of the Mass Transit Railway in Hong Kong

The Second GAMUT Annual WorkshopMelbourne, 11-14 November 2007The Making of the MassTransit Railway in Hong KongFujio MizuokaGraduate School of EconomicsHitotsubashi UniversityTokyo, Japan

Bus Service in 1950s-60s• Kowloon Motor Bus Co. (KMB) served in Kowloon andthe New Territories; and China Motor Bus in HK Island.• The KMB drivers were unionised under influence of thePeople’s Republic of China (PRC).• Besides ferry to cross the Victoria Harbour and going toand from outlying islands, buses were sole means oftransportation to commute from home to workplace,since the labourers couldn’t afford private cars.• Crowded, sparse frequency and dirty coaches withcockroaches on seats. Commuting was an ordeal and a soure of dissatisfactionamong the Chinese labour.

Initial Instigation:Anti-British Uprising in 1966 and 67• Inspired by the Cultural Revolution in the PRC.• Triggered by the proposed fare hike of the British-run StarFerry, connecting Kowloon with HK Island.• The HK Chinese were mobilised based on their discontentwith various aspects of crowded and oppressive urban life(including the condition of public transportation).• Almost the entire length of the Nathan Road was blocked bythe violent uprising, and transport system of HK wasparalysed.• Handwritten banners condemning British Imperialism werestuck onto the gate of Governor’s House.• After the uprising, the colonial government studied its cause;and took measures to avoid any similar events being repeatedin the future.

TheProposedInitialSystem

Why Japanese ConsortiumIn the British Colony?• HK British then were in conflict with the London government ondevaluation of fiscal reserve deposit. It is believed that the colonialbureaucrats attempted to show their independence from the homegovernment.• MTR was NOT ‘luxury’ underground system enticing former cardrivers into public transportation, but the system to move themasses having suffered from congestion problem model was notBART in San Francisco Bay Area, but the Tokyo subwaoy.• Railway technology that successfully put ATO system into practicaluse for the bullet train (Shinkansen).• Kakuei Tanaka, the Prime Minister of Japan in early 1970s, wantedto expand the Japanese public works undertakings to East andSoutheast Asia.• Japan agreed to complete the task of constructing the whole ‘initialsystem’ at fixed price of HK$ 5 billion.• Jardine, Matheson & Co., the leading trading house of HK acted asthe local agent.

Public HousingNathan Rd.IndustrialEstateFinancial& Gov’tCentre

Property Sector as a Key factor in theMTR Project• The MTRC developed Telsford Garden over Kowloon Bay railway depot Thedevelopment contained 5,000 flats and a shopping complex.• The colonial government offered the land of $170 million for the purpose ofcar barn itself and HK$165 million for the title to develop the space abovefor residential and commercial purposes, for free.• In exchange for this government offer, the MTR Corporation issued equityof the same value and the colonial government accepted it.• In short, the Telford Garden constituted an equity injection of HK$335million from the colonial government.• Property development raised 18.6% of the construction cost to the MTRCorporation for the Modified Initial System.• Revenue from property development depended, however, much upon themarket conditions and therefore rather uncertain.• The colonial government offered unusually favourable terms for land tenurein releasing the Crown land, especially for the years when property marketis in stagnation.• In all, the MTR Corporation developed 19 projects along the Modified InitialSystem, Tsuen Wan Extension and Island Line put together.

Telford Garden:A Big Car Barn underneath this Residential Complex

Additional Measures toAccelerate Construction and Save Costs• A penalty system to the contractors. Should a contractor fell behindschedule, the company was then liable, as stipulated in a clause incontract, to pay a substantial amount of penalty which is ‘sufficientto make it hurt’.• Appeasing the stubborn yet economically significant industrialists:raising ex gratia compensation to illegal factories from HK$20 toHK$38/sq. ft, especially when the industrialists contributedsignificantly to the export-oriented economic growth.• Hard-line measures for squatters and hawkers: the colonialgovernment, including deployment of anti-riot police force againstthem.• Fixed price contract in Local Currency (HK$) for rolling stocks builtby Metro Cammell, Birmingham, UK, with Spartan interior andnon-upholstered seats (to avoid cockroaches).• No toilets at any of the stations. No laughing matter…

InitialModel ofMTRRollingStock(built byMetroCammell,UK)

Increment Extension of Lines• October 1979: The first section of the MIS Shek Kip Mei(public housing area)– Kwun Tong (industrial area)(8.4km)• February 1980: The MIS line extended to Chater(downtown in HK Island)• May 1982: Tsuen Wan (a large industrial new town)Extension (10.75km)• May 1985 – May 1986: Island Line (12.5km)• October 1989: Eastern Harbour Crossing• July 1998: Airport Express (connecting downtown withthe New Hong Kong Int’l Airport) and Tong Chung Line• August 2002: Tsuen Kwan O Extension• August 2005: Disneyland Resort Line

MTR and Changing Natureof New Towns• Until 1970s, the colonial government built three largenew towns, Shatin, Tuen Mun and Tsuen Wan. Initially,they were not connected by rapid transit with downtown,but planned as ‘self-contained spatial unit’, after theBritish new town planning philosophy. Employmentopportunities (mainly labour-intensive lightmanufacturing) were created within the new town.• Whereas in Tsuen Kwan O new town, planned in 1980s,MTR had been integrated into the concept from thebeginning; the residents were expected to commute tothe jobs using MTR. No manufacturing functions wereplanned within the new town area.

Performance of the MTRCfor the First Decade• Prudent rail operation– Steady growth of revenue and operating profit.– Efficiency of the rail operation (as indicated by the cost andprofit per passenger) was on the steady increase.• Financing costs put burden on the corporate finance– Costs for Financing showed increase especially in the first half ofthis period.– Due to this burden, the final balance of account ended up mostlywith deficit.• Fluctuating Property revenue– This is the outcome of fluctuating property market conditions.In 1981-84, the market especially stagnated due to politicaluncertainty beyond 1997 and concomitant emigration flow.– The fluctuating market trend greatly regulated the finalprofit/loss balance of the MTRC.

H K $ per passenger carried4.543.5FarerevenueHK$32.521.5Railwayoperationcosts10.501980198119821983198419851986Year19871988198919901991Railwayoperationprofit

G eneralP rofit & Loss A ccont4,0003,500TotalR evenue3,000O perating P rofitHK$ million2,5002,0001,5001,000500Interest andFinance C hargesPropertyDevelopm entProfitProfit/(Loss)0-500Year 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990Year-1,000-1,500

Conclusion• The MTR functioned as the ultimate solution for the ethnic cum labourstrife in colonial Hong Kong from urban spatial integration.• The colonial government put through this objective under strong initiative,contrary to its ‘non-interventionist’ claim. It sought the knowledge of theMTR from UK Consultants and Japanese Experiences.• The Japanese however did not realise the urgent need of the MTR on thepart of colonial government. They suddenly shifted their position to blatantshort-run profit motive and broke the promise.• They thereby failed to take up the position to be the source of knowledge forrail-based urban transport in China and Southeast Asia.• With no prior ‘path’ to depend on, the planning and management of theMTR was more neo-liberalist and cost effective than urban railwaymanagement elsewhere.• The prudent yet labour-hostile rail management provided HK with asustainable rail-based urban transport network as a result.• The MTR internalised much of externalities that the newly-built railway hadgenerated, through a number of property development projects along theline, yet this exposed the balance-sheet of the MTRC to the mercy of generalproperty market trend.• The advent of MTR had effect to change former concept of new town fromthe self-contained into that dependent more on the external economicfunctions.